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2016 (2) TMI 527 - DELHI HIGH COURT

2016 (2) TMI 527 - DELHI HIGH COURT - [2016] 382 ITR 88 - Eligible assessee as defined under Section 144C(15)(b) - whether the Assessing Officer was competent to pass a draft assessment order under Section 144C(1)? - whether the petitioner does not fall in the category of an “eligible assessee”, as defined under Section 144C(15)(b)? - Held that:- The petitioner is admittedly not a foreign Company. Secondly, the Transfer Pricing Officer has not proposed any variation to the return filed by the pe .....

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), no draft order can be passed in the case of the petitioner under Section 144C(1).

As the petitioner, not being an “eligible assessee” in terms of Section 144C(15)(b) of the Act, the Assessing Officer was not competent to pass the draft assessment order under Section 144C (1) of the Act. The draft assessment order dated 31.03.2015 is accordingly quashed. - Decided in favour of assessee - WP (C) 4262/2015 - Dated:- 17-2-2016 - Badar Durrez Ahmed And Sanjeev Sachdeva, JJ. For the Peti .....

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n view of the contention of the petitioner that the petitioner does not fall in the category of an eligible assessee , as defined under Section 144C(15)(b) of the Act. 2. The contention of the petitioner is that firstly the petitioner is not an eligible assessee, as defined under Section 144C(15)(b) of the Act as the Transfer Pricing Officer (TPO) had not proposed any variation in the income or loss return which was to the prejudice of the petitioner. Secondly, while framing the draft assessment .....

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aft assessment order was passed, which suffers from jurisdictional defect, the assessment proceedings have now become time barred. 3. The petitioner is a Company incorporated in India and is engaged in the business of manufacture and sale of passenger cars. The petitioner is a subsidiary company of Honda Motors Company Limited, Japan ( Honda Japan for short). The petitioner purchases raw material, spare parts, capital goods etc. from Honda Japan and cars are manufactured in India under the techn .....

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) of the Act and no variation was proposed to the returned income of the petitioner and it was held as under:- 4. The Transfer pricing documentation, which contains the functional and economic analysis of comparables and the assessee, has been examined and placed on record. 5. In view of the functional and economic analysis of assessee, no adverse inference is drawn in respect of the international transactions undertaken by the assessee during the FY 2010-11. 5. On 31.03.2015, the Assessing Offi .....

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order and raised the three contentions, as noted hereinabove. With regard to the contention of the petitioner that the Assessing Officer was required to give effect to the Circular issued by the CBDT while making disallowance under Section 40(a)(i) of the Act, the respondents in their counter-affidavit have contended that in terms of the Circular No.3/2015 dated 12.02.2015 issued by the CBDT disallowance under Section 40(a)(i) should be made only in the appropriate proportion of the sum chargeab .....

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nder: Reference to dispute resolution panel. 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. xxxx xxxx xxxx xxxx (15) Fo .....

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e any variation in the income or loss return which is prejudicial to the interest of such assessee. The draft assessment order is to be forwarded to an eligible assessee which means that for the section to apply a person has to be an eligible assessee . 9. Section 144C (15)(b) of the Act defines an eligible assessee to mean (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under section 92CA(3); a .....

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in whose case the variation arises as a consequence of an order of the Transfer Pricing Officer and (ii) any foreign company. The use of the word means indicates that the definition eligible assessee for the purposes of Section 144(C)(15)(b) is a hard and fast definition and can only be applicable in the above two categories. 12. First of all, the petitioner is admittedly not a foreign Company. Secondly, the Transfer Pricing Officer has not proposed any variation to the return filed by the petit .....

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o draft order can be passed in the case of the petitioner under Section 144C(1). 13. Similar is the view taken by the High Court of Gujarat in Pankaj Extrusion Limited versus Assistant Commissioner of Income Tax : (2011) 198 Taxman 6 (Gujarat), which has held as under:- 7. Plain reading of clause (b) of sub-section (15) of section 144C would show that an assessee can be stated to be an eligible assessee as referred to in sub-section (1) of section 144C in whose case variation referred to in the .....

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